Reaeach On Problems And Countermeasures Of New Drug R&D Outsourcing Of Chinese Pharmaceutical Enterprises

As an integral part of national economy, pharmaceutical industry is one of the mostrapidly growing and most highly competitive high-tech industries in the present world. Inpharmaceutical industry, new drugs tend to be the biggest concern of people. New drug R&D,as it were, not only directly concerns the destiny of pharmaceutical enterprises, but also has adirect bearing on the current and future survival and development of the whole nationalpharmaceutical industry. In order to reduce researching and developing costs and shortenmarketing cycle times, more and more pharmaceutical enterprises redouble their efforts toenhance cooperation with CRO in new drug R&D outsourcing. However, in the practice ofnew drug R&D outsourcing, pharmaceutical enterprises face many problems and obstacles,among which due to incomplete contract being held up by CRO keeps besetting manypharmaceutical enterprises. The hold-up problems severely discourage pharmaceuticalenterprises from outsourcing the new drug R&D and cause major problems for theeffectiveness of the new drug R&D as well. Therefore, how to establish effective mechanismsto deal with the hold-up problems has been a key issue both in academia and medicine whenconsidering new drug R&D outsourcing.Based on theoretical tools and research methods like Incomplete Contracting Theory,transaction cost theory and Game Theory, with which combined the case study, this paperanalyzes in depth the hold-up problems faced by Chinese pharmaceutical enterprises in newdrug R&D outsourcing. At the very beginning, this paper follows a detailed analysis of thecharacteristics, forms, hazards of the hold-up problems, to achieve a thorough understandingof such problems faced by Chinese pharmaceutical enterprises in the new drug R&Doutsourcing. Then it focuses on the analysis of the causes of the hold-up problems in the newdrug R&D outsourcing of Chinese pharmaceutical enterprises, and from both micro andmacro point of view, it explains the specific reasons for the hold-up problems in the new drugR&D outsourcing. In the final part, from both micro and macro point of view, this paperprovides solutions to deal with the hold-up problems in new drug R&D outsourcing, enablingthe opportunistic CRO, under incomplete contacts, to make a choice that is favorable topharmaceutical enterprises. .This paper further argue that bounded rationality, uncertainty and complexity of drugdevelopment, and high transaction costs lead to the outsourcing contract of thepharmaceutical companies and CRO with incomplete, and due to their own specific assetsinvestment, pharmaceutical enterprises will face the hold-up problems. By drawing on thebuyer--seller model, this article confirmed the Appropriable Quasi Rents‘due to incompletecontract is the source of hold-up predicament in the new drug R&D outsourcing as topharmaceutical enterprises. On this basis, this paper further argue that the hold-up problems inthe new drugs R&D outsourcing at the micro level mainly due to system deficiencies causedby incomplete contract，including power control deficiencies, price contract deficiencies, trustmechanism deficiencies. Macro-level causes include immatureness of CRO outsourcingmarket, imperfectness of legal system and regulatory institutions, and lack of social ethics.Finally, this paper puts forward countermeasures to solve the hold-up problems in the newdrug R&D outsourcing. The micro-lever countermeasures include price control, power controland build-up of trust mechanism. The macro-lever countermeasures include regulating thedevelopment of the CRO industry, improving the economic and legal system, and establishingand improving the regulatory authorities to establish a good social code of ethics.